Monday, February 23, 2015

The cycle model for silver suggests upward pressure in silver prices over the next few weeks. To help interpret the Z-score, I have placed a long term model going back to 1968 in the Long Term Cycle Charts page.

Friday, February 20, 2015

The gold model Z-score increased to 2.4 from the previous iteration. This suggests increasing pressure for a reversal to the mean, in this case a rise towards the $1300 level. A reader asked how to interpret the Z-score, and in answer I have also posted a long term model ranging from 1968 to 2016.

If you click on the chart to get the higher resolution graphic, you will see that on a historical basis the Z-score has been >3 about a dozen times, out of 11909 data points in the time series. This is why in my last gold cycle model chart update I mentioned that it was unlikely that the model would breach a Z-score of 3. For convenience, I will also add the model to the long term chart section. However, it also becomes more likely that the model might fail to converge unexpectedly and annoyingly. According to the cycle model, we seem to be at a major turning point for gold, so we are in the "make or break" time for the model. Hence, I will try to keep weekly updates current.

Sunday, February 15, 2015

The VIX cycle model suggests continued upward pressure on VIX, especially given the current Z-score of 3.4. The usual caveat is that this model is useful for estimating longer term direction rather than day-to-day swings in price. Back in August of 2014, the VIX cycle model suggested a gradual rise into 2015. The timing was more accurately predicted than the price levels. That model run is on the blog and also shown below. The difference between the actual and predicted is an important input into a neural net model I use, since it contains the cyclical information, but there are other factors used in the neural net model that clearly influence short term behavior which cannot be captured by cyclical analysis.

Friday, February 13, 2015

Once again, gold prices are lagging the predictive curve, this time by two sigma units. This suggests that pressure for a reversal is building based on historical price cycles. This is similar to what we observed at the end of October last year as you can see below and on the blog. Hopefully this is also helpful to readers learning to interpret predicted vs actual divergences by means of the Z-score. One other observation to take into account: at this point in time the predictive curve is rising, if the gold price were to drop below $1200 in the next few days, the Z-score would rapidly rise to greater than 3, an unlikely event by the model parameters, suggesting that $1200 +/- is a base price for gold at this time.

Sunday, February 8, 2015

This cycle model suggests that index prices have gotten a bit ahead of themselves, with the Z-score close to 2 sigma units suggesting a reversal. According to the model, reversal is highly probable in the next few weeks. This cycle model suggests a maximum in the index occurring in April 2015. This is likely due to strong seasonal cycle components.

Saturday, January 31, 2015

The VIX cycle model seems to have predicted a multi-month turning point for volatility. The model is suggesting higher average volatility going forward into 2015 but the caveat is that it does not capture short term fluctuations in the negative or positive directions. A previous iteration of the model is shown below and here on the blog.

Wednesday, January 21, 2015

The silver cycle model is performing well, and continues to suggest higher prices into the Spring Equinox. By chance, the predicted and actual price curve are coincident. Note the Z-score approaching zero. I will make a long term silver cycle model chart and data available by the end of this week. Some previous iterations of the model are shown below and here on the blog.

Saturday, January 17, 2015

The gold cycle model continues to suggest higher gold prices going forward. I wanted to illustrate the use of a Z-score using the differences between the current chart and a previous iteration of the model from October, 2014 shown below and also here in the blog. The high Z-score in the chart below, which passed "three sigma" implied a high probability of reversal, which indeed occurred. Given the reasonable performance of this commodity model, I will be providing an extension of the model to 2025 as I did with the XOI.X model.

Saturday, January 10, 2015

The VIX cycle model, while it does not capture short-term spikes in VIX seems to have predicted a smoothed rise in VIX beginning in the third quarter of 2014. The Z-score approaching +2 sigma suggests continued pressure for rising values through 2015. It may be a coincidence, but the VIX curve now parallels the silver price pseudocycles which also emerged for 2015. A previous iteration of the model is shown below and here on the blog. I would also note that comparing and contrasting the two charts, one can see that timing of longer-term directional change is better predicted than price magnitude.

Tuesday, January 6, 2015

The silver cycle model suggests a rising price with a maximum before Spring Equinox in 2015. The pseudo-cyclical structure continues to emerge. A previous iteration of the model is shown below and here.

Thursday, January 1, 2015

The gold cycle model strongly suggests higher prices through 2015 and into 2016. The usual caveat is that the time estimates for price curve maxima and minima are more accurate than the price predictions at the turns.

Saturday, December 13, 2014

The gold cycle model is suggesting that we may have seen a low in gold price over the past couple of months. Based on cyclical factors, a rising price is forecast into 2015 and beyond. A previous iteration of the model is shown below and here on the blog.

Saturday, November 1, 2014

Silver prices continue to track model predictions quite well. The model suggests silver prices may have reached a bottom for the next few months, and a price of about 1700 is expected by the end of 2014. A previous iteration of the model appears below and here on the blog.

Friday, October 31, 2014

The gold cycle model is predicting a very high probability of a turn to the upside in the next few weeks, based on the outlier Z-score greater than 3 "sigma.". If the reversal does occur, then gold prices should quickly rise to well above 1400 by the end of the year. A previous iteration of the model is shown below and here on the blog.

Sunday, October 19, 2014

The cycle model continues to suggest lower prices for the index beginning in 2015. According to the model, index price should stabilize around 1400 before the next drop to the 1300 area begins at the end of 2014. A previous iteration of the model is shown here and below.

Tuesday, October 7, 2014

The VIX cycle model continues to suggest higher index prices going forward, with a peak of about 35 at the end of 2014. The usual caveat with this model is that it does not capture very short time frame price swings, but it does seem to be a reliable longer term model, for now. The previous iteration of the model is shown here and below.

Monday, October 6, 2014

The silver cycle model continues to perform adequately. The model is suggesting a pseudocycle for silver where prices range from about 1500 to 2100 through the end of 2015. A previous iteration of the model is shown here and below.

Sunday, October 5, 2014

The gold cycle model, which has performed well in the past, continues to suggest a strong upward pressure in price since the model is past its turning point. The gap between the model prediction and the actual price continues to widen, as noted by the rising Z-score. It would be very unusual if the divergence was to exceed 2.5 on the Z-score without a reversal. A previous model is shown below and here.

Saturday, September 27, 2014

The XOI.X cycle model successfully predicted the turning point for the index, and now suggests a bottom of 1100 towards the end of 2015. A previous iteration of the model is shown below and here in the blog archive.